WASHINGTON D.C.: The US Federal Reserve Bank has announced that cash-strapped banks throughout the US borrowed some $300 billion during last week.
Almost half the funds, $143 billion, went to holding companies set up by the Federal Deposit Insurance Corporation for Silicon Valley Bank and Signature Bank, two major banks that collapsed over the past week, causing turmoil in financial markets.
The Fed stressed that the FDIC has guaranteed the repayment of the loans.
Since the bank failures last weekend, major banks, such as Bank of America, have reported receiving inflows of funds from smaller banks, so the remaining funds from the Federal Reserve were likely borrowed by these small banks needing to raise cash to pay off depositors who tried to withdraw their money.
Over the past week, an additional $153 billion in borrowing from the Fed came through a longstanding program, called the "discount window," through which banks can borrow from at a discount for up to 90 days.
To allow banks to raise cash and pay depositors withdrawing their money, the Fed has lent an additional $11.9 billion from a new lending facility.
In a research note, Michael Feroli, economist at JPMorgan Chase, said that the Fed's assistance is currently about half what it was during the financial crisis 15 years ago. "But it is still a big number," he said, as quoted by the Associated Press.
Despite Silicon Valley Bank and Signature Bank owning billions of dollars of supposedly safe Treasury and other bonds that paid low interest rates, their collapse required the emergency lending from the Fed.
The Fed said it has received $15.9 billion in collateral, more than the $11.9 billion it has lent, for its new lending facility.